Cryptocurrency service providers in Singapore will have to move customer assets to a segregated statutory trust before the end of the year to reduce the risk of loss or misuse of funds, the city state’s central bank said Monday.

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Fast facts

  • Holding such assets in a trust will also help in the recovery of customer funds in the case of a crypto service provider becoming insolvent, the Monetary Authority of Singapore (MAS) said in a statement
  • MAS will also restrict services of lending and staking of cryptocurrencies to retail customers, but indicated in the statement it is still assessing this issue. 
  • “There were diverse views received on this proposal [on staking services]. Some respondents suggested to allow DPT [Digital Payment Token] service providers to offer these activities with the retail customer’s consent and risk disclosures, while others advocated a ban on these high risk and speculative activities,” the statement said. “MAS will monitor market developments and consumer risk awareness as these evolve, and will take steps to ensure that our measures remain balanced and appropriate.”   
  • These measures follow an October 2022 public consultation on regulatory measures to improve investor protection and market integrity in cryptocurrency services. 
  • MAS is also seeking public feedback on these latest draft legislative amendments announced on Monday.
  • “While the segregation and custody requirements will minimize the risk of loss of customers’ assets, consumers may still face significant delays in recovering their assets in the event of insolvency of the service providers,” MAS said, pointing out that regulations alone cannot protect consumers from all losses.
  • MAS issued on Monday a separate consultation paper proposing requirements for crypto service providers to address unfair trading practices. MAS said it will also set out legislative provisions and the types of wrongful conduct that constitute offenses.
  • The central bank will receive comments on the proposed legislative amendments and regulatory measures to address market integrity risks till Aug. 3. 
  • “MAS’ announcement today is a huge step forward for Singapore and a much-welcomed one,” Lasanka Perera, chief executive of crypto exchange Independent Reserve Singapore, said in an emailed statement. 
  • “This not only underscores the regulator’s conviction to protect investors but will also undoubtedly inspire greater confidence from the corporate and institutional sectors with interest in this space,” Perera added.  
  • However, Perera said the latest requirements will take time to work through as service providers may have to restructure parts of their businesses or operations in order to comply.
  • Singapore’s central bank has been tightening regulations since the beginning of last year when it restricted crypto exchanges from publicly advertising their services. MAS has also issued repeated warnings to retail customers to stay away from crypto trading and has said cryptocurrencies have no fundamental value.
  • (Updates to add bullet point two, three.)

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